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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: September 24, 2020

Law Firm Disqualified Because of Acquired Law Firm’s Prior Representation of Opposing Party

On September 8, 2020, Justice Borrok of the New York County Commercial Division issued a decision in Goren v. Barnett, 2020 NY Slip Op. 32952(U), disqualifying a law firm because a firm that it had acquired previously had represented an opposing party, explaining:

From 2010 to approximately 2013, the law firm of Amstein & Lehr LLP (Arnstein & Lehr) represented the Regional Center as securities counsel in various matters related to its EB-5 program administered by the United States Citizen and Immigration Services. In 2017, Amstein & Lehr merged with Saul Ewing LLP. Saul Ewing represents Lela Goren in this matter, both individually and derivatively on behalf of the Regional Center. Rule 1.9 of the Rules of Professional Conduct provides: A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or substantially related matter in which that person’s interests are materially adverse to the interests of the former client. In addition, Rule 1.7 provides, in relevant part, that: a lawyer shall not represent a client if a reasonable lawyer would conclude that the representation will involve the lawyer in representing differing interests.

In support of their motion, the Defendants submit certain invoices (the Invoices) from Amstein & Lehr from 2011-2013 for work on matters that related to Ms. Goren’s allegations in this case, including the International Gem Tower Fund LLC Operating Agreement and the finder’s fee arrangements. The Invoices were paid by the Regional Center or Mr. Barnett’s company, Extell Development Company. At least three Amstein & Lehr attorneys who worked on these matters for the Regional Center are now partners at Saul Ewing.

The Invoices submitted by the Defendants establish that the subject matter of Amstein & Lehr’s prior representation of the Regional Center in connection with the Operating Agreement and finder’s fee arrangements is substantially related to the issues in this case and that Ms. Goren’s interests are materially adverse to those of Gary Barnett and the Regional Center. In addition, Saul Ewing’s representation of both Ms. Goren and the Regional Center presents a concurrent conflict of interest because it would require the firm to argue that the same transactions that it previously advised the Regional Center to undertake were part of the fraudulent scheme alleged by Ms. Goren. Finally, the former Amstein & Lehr attorneys’ conflicts of interest are imputed to the entire firm of Saul Ewing under Rule 1.10 (a) of the Rules of Professional Responsibility, therefore no lawyer in the firm may undertake the representation.

(Internal quotations omitted).

We both bring and defend motions relating to attorney conflicts and do appeals of the decisions on those motions. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you face a situation where counsel may be–or is accused of being–conflicted.

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